Re:Andreessen Horowitz Raises New $1.5B Fund
by napoleond on Friday March 28, 2014 @12:20AM
(#7485327)
The 20% is carry, which is earned as a percentage of net income. So let's say that A16Z invests 5M in a company on a 10M pre-money valuation. A16Z owns 1/3 of the company. The company sells for $30M the next day to Facebook. A16Z now has $10M dollars. They take $2M of that for themselves and then they distribute back to the LPs the other $8M.
I'm pretty sure carry is profit (http://en.wikipedia.org/wiki/Carried_interest), so in your example A16Z would pocket $1M, not $2M (because the $5M A16Z invested needs to be repaid to the LPs first, and then A16Z gets 20% of the remaining $5M). Please correct me if I've misunderstood.
Re:Andreessen Horowitz Raises New $1.5B Fund
by zt on Friday March 28, 2014 @02:10AM
(#7485619)
Oh ya, that's my mistake. I was right when I called it "net income" but then didn't do the net in the actual math! I'll leave it unedited so your comment makes sense though.
I'm pretty sure carry is profit (http://en.wikipedia.org/wiki/Carried_interest), so in your example A16Z would pocket $1M, not $2M (because the $5M A16Z invested needs to be repaid to the LPs first, and then A16Z gets 20% of the remaining $5M). Please correct me if I've misunderstood.